What You Need To Know About Debt Consolidation

If you are paying several debts like an auto loan, student loan, and credit card, it can be hard to keep up with payments and balances. Consolidating all these into a single loan makes your work easier. Debt consolidation is the process of using one loan to pay off different loans so as to simplify debt repayment. It becomes easier to pay off debt when it is just one balance instead of multiple loans. In some cases, you can even get a lower interest rate.

Should One Consider Debt Consolidation

Debt consolidation is often a good idea for borrowers with multiple high-interest loans. However, it is only practical if your credit score has improved since you took the original loan. With a good credit score, you can qualify for a loan with a lower interest, meaning it is a good idea to consolidate your debts. It is also good to think about what led to your current debts in the first place. If you do not address the underlying issue, whether it is overspending or poor money management skills, debt consolidation will only become another debt you are struggling to pay.

Advantage of Debt Consolidation

Here are some of the advantages of debt consolidation.

Lower Interest Rates

If your credit score has shot up from the last time you took the other loans, consolidating debts can help reduce your overall interest. This will save you money, especially if you do not consolidate your debts with a long-term loan. To ensure you get a favorable rate, https://prets514.com/ recommends shopping around. Keep in mind, though, that some debts have a higher interest than others. For instance, credit card debts have higher interest rates than student loans. Debt consolidation can lead to a lower rate than some types of your debt and a higher rate than others. Focus on what you are saving in general.

Improved Credit Score

Consolidating your debts can improve your credit score in some way. For instance, paying off your credit card can help lower the credit utilization rate, shown in your credit card report. On top of that, making payments on time and consistently and eventually paying off the loan will improve your score over time.

Streamlines Finances

When you combine multiple debts into a single loan, you reduce the number of payments you have to worry about. This also reduces the chances of making payments late because you are only paying off one debt.

May Expedite Payoff

If you are paying less interest on the debt consolidation loan than what you were initially paying on the other debts, try and make extra payments using the money you have saved. This will help pay off your debt faster.

Reduced Monthly Payments

Your overall monthly payments are likely to be reduced when you consolidate your debt because future payments are now spread over a new loan term. That means your monthly budget goes down.

Before opting for debt consolidation, consider your situation first. Debt consolidation might be for everyone. But for some, it is the light of the tunnel that helps them manage debt. Ensure that when you take this loan, it is going to help you.

What You Should Know about Cash Discount Credit Card Processing

There are many companies that are offering cash discount credit card processing in order to help eliminate credit card processing fees. When this is done correctly, it’s legal and permitted in your merchant agreement. However, there can be some confusion between surcharges and cash discounts. The confusion has led to categorizing a surcharge program as a cash discount program. 

Surcharge Vs. Cash Discount

A cash discount is when credit card prices are posted and a business offers a discount on the price for a customer who pays with cash. A surcharge is when you post the cash prices but charge an extra fee on top of that for any customers who pay with a card. In the first case, customers pay less than your listed price. In the second, the customers are paying more. If you are charging more than your listed price then it is a surcharge, no matter what it is being called. Even if your processor tells you, you are adding a service fee, and it is still considered a surcharge. These differences seem minor, but it’s important in terms of compliance and legality. If you get it wrong, it means your merchant account could be shut down, or your risk fines. 

Why Does the Distinction Matter?

There are two reasons why this distinction matters. There are states where surcharges aren’t allowed and there is also a prohibition on surcharges on debit cards. 

Cash discounts in the true form are allowed in all 50 states, but there are some states that have laws against surcharge programs. These states are Oklahoma, Massachusetts, Maine, Kansas, Florida, Connecticut, and Colorado. These laws have come under scrutiny recently and there are states that have gone to court over the laws. While laws may change in the future, you have to check with the state Attorney General for the latest information on surcharges. 

Surcharges aren’t permitted on debit cards. This is true even if you are running one as credit, and it’s not permitted even in states where a surcharge is legal. If you are adding it to a debit card transaction, even if you are calling it something different, you could risk negatively affecting your merchant account. 

How to Tell if a Processor Is Offering a Surcharge Program

Many processors seem to be offering cash discount credit card processing, but it’s really a surcharge program. If you see a reference to a service fee or non-cash adjustment then it’s a surcharge program. Processors that offer a surcharge program may say that your business lists cash prices and then adds fees for customers. If you aren’t posting the credit card prices and offering the cash discount then it’s surcharging. 

Should You Implement a Cash Discount?

For many businesses, there isn’t any harm in offering a cash discount if you have set prices to account for cards. This just means you are passing the processing fee savings to the customer. Some customers may think that a business that prefers cash is not properly paying taxes, and that can impact your perception, but for the most part, it’s not a problem as long as it’s done correctly.